From: Wilson, John [wilsonj@cbis-fsc.com]
Sent: Wednesday, March 31, 2004 10:59 AM
To: 'rule-comments@sec.gov'
Subject: File No. S7-19-03 Release Nos. 34-48626; IC-26206
March 31, 2004
Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Re: File No. S7-19-03 Release Nos. 34-48626; IC-26206
Dear Mr. Katz:
Christian Brothers Investment Services, Inc. (CBIS), a registered investment
adviser under the Investment Advisers Act of 1940, would like to submit
comments pursuant to the Commission's October 14, 2003 "Proposed Rule:
Security Holder Director Nominations" (File No. S7-19-03 Release Nos.
34-48626; IC-26206).
CBIS manages approximately $3.5 billion for Catholic organizations seeking
to combine faith and finance through the responsible stewardship of Catholic
assets. CBIS is an active shareholder, working with companies on a number of
issues we believe are critical to the long-term value of the investments we
make on behalf of our clients.
CBIS submitted comments on this proposed rule during the initial comment
period. At this time, we would like to reiterate our support for the
principle of shareholder access to the proxy and the main points we raised
in the original submission.
The goals of proxy access should be to increase the accountability of boards
to shareholders and to help ensure improved corporate governance. In order
to achieve these goals, the process for shareholder nominees must follow
some basic principles:
* Shareholders should have the right to nominate candidates to
the board.
* The nomination process should remain the primary responsibility of
the nominating committee of the board.
* The process must be broadly inclusive. Since management should be
accountable to all shareholders, this process should be open to smaller
shareholders.
We are concerned that the current proposal creates obstacles to shareholder
nominees that would exempt most companies from shareholder nominees, create
an unreasonably long timeframe for replacing underperforming directors, and
exclude all but the largest shareholders from the process.
Moreover, while this proposal aims to empower shareholders, most will have
no more rights as a result of this rule. The rule would create classes of
shareholders and offer more rights to large than to small shareholders. We
are concerned that companies may feel a sense of accountability to the
largest shareholders that they do not feel to others. The result of the
proposal is a minimal and uneven expansion of shareholder rights, and a
mechanism for corporate accountability that most companies could safely
disregard. We question, therefore, whether this proposal represents a
meaningful improvement of shareholder rights or an effective mechanism for
board accountability.
Our specific concerns are detailed in our letter dated December 5, 2003. The
following summarizes our suggested changes, made in the previous submission:
* We believe that shareholder director nominations should be
possible without "triggers."
* The threshold for nominating directors should be lowered to 1%,
bringing it in line with the holdings necessary to file a "direct access"
proposal.
* The limitation on the size of security holder groups should be
relaxed or eliminated to facilitate the participation of small shareholders.
* We believe that if triggers are used in any capacity, any mandatory
shareholder resolution that passes should qualify as a "trigger."
* The process for challenging and omitting nominees and "direct
access" proposals should follow the model of rule 14a-8, as with other
shareholder proposals.
We understand that some commentators have suggested that, rather than
adopting this proposed rule, the Commission should allow shareholders to
reject the candidacy of any director nominee who receives a vote of less
than 50%. While we support this idea as a complement to the proposed rule,
we cannot support it as a substitute. The right to reject nominees has
little meaning if no replacement is available. Such a suggestion might have
merit, however, if shareholders also had the ability to select the rejected
nominee's replacement. Any proposal should also include a clear standard
for determining which of the nominees in a contested election were
successful.
We appreciate the work of the Commission in all its efforts to protect and
promote shareholder rights, and thank you for the opportunity to submit
these comments. Please contact me with any questions.
Sincerely,
John K.S. Wilson
Director - Socially Responsible Investing
John K. S. Wilson
Director - Socially Responsible Investing
Christian Brothers Investment Services
90 Park Avenue
29th Floor
New York, NY 10016
(p) 212-490-0800x118
(f) 212-490-6092
(e) wilsonj@cbisonline.com
url: www.cbisonline.com
**** Important Notice ****
For the protection of our participants, Christian Brothers Investment Services, Inc.
DOES NOT ACCEPT INSTRUCTIONS REGARDING PARTICIPANT ACCOUNTS BY E-MAIL
and CBIS policy does not permit employees to transmit CBIS or participant policy decisions,
participant account instructions, or information such as account names, numbers, custody
numbers, PINís, or other identifying information by email. CBIS strongly recommends that
participants refrain from email transmission of such information.
The information contained in this transmission is confidential.
It is intended for the sole use of the addressee.
CBIS reserves the right to monitor all electronic correspondence sent to or by CBIS.
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